Valero Energy Corporation (VLO) is a petroleum marketing and refining company operating in the U.S. The company’s stock is currently trading around $39.75 in a 52 week range of $28.07-$48.97. VLO has rallied over 16% year to date and is higher by over 36% in the past 12 months. VLO is set to report earnings tomorrow before the market open with analyst expecting earnings around $0.42 per share on revenues of $30.5 billion. VLO has shown relatively mixed performance on earnings day over the past 8 quarters. The stock has sold off 4 times and rallied 4 times on earnings day over the past 8 quarters. The average earnings day move in VLO is 3.1%. Currently the options market is implying a move of $1.80 (4.5%) by this Friday’s close. Given the extremely bullish order flows and strong chart in VLO we want to look at a long set up in VLO ahead of earnings. Using the implied move we can calculate an upside target of $41.55 and use this target to set up a trade.
Trade: Buying the VLO Nov 1st Weekly 40.5-41.5 Call Spread for $0.30
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $40.80
